Banta Achieves Record Fourth Quarter and 2005 Results

Wednesday, February 01, 2006

Press release from the issuing company

MENASHA, Wis., Jan. 31 -- Banta Corporation today reported a very strong fourth quarter, concluding a year that established new all-time highs in both revenue and profitability. Fourth quarter earnings from continuing operations rose 32 percent to a record $23.3 million, excluding a tax expense of $4.4 million (18 cents per diluted share) associated with Banta's repatriation of accumulated foreign earnings. The results compare with $17.6 million reported in 2004's final quarter. Diluted earnings per share from continuing operations, excluding the repatriation tax expense, reached 95 cents, a 36 percent increase over the 70 cents reported in 2004's fourth quarter. Including the repatriation tax expense, fourth quarter earnings from continuing operations also reached an all-time high, increasing 7 percent to $18.9 million (77 cents per diluted share). Revenue from continuing operations increased 9 percent to a fourth quarter record $410 million, compared with $376 million in 2004.
Full-year 2005 earnings from continuing operations increased 18 percent to $72.7 million, excluding the repatriation tax expense in the fourth quarter, compared with 2004's $61.5 million. On that same basis, diluted earnings per share rose 22 percent to $2.93, compared with the prior year's $2.41. Including the additional fourth quarter tax expense, 2005 earnings from continuing operations also reached an all-time high, increasing 11 percent to $68.3 million, and diluted earnings per share rose 15 percent to $2.76. Revenue from continuing operations for the year rose 9 percent, reaching $1.54 billion, compared with 2004's $1.42 billion.
Results from continuing operations exclude the contributions of Banta's healthcare products business, which was sold effective Apr. 12, 2005. Including the operating results of the discontinued healthcare business, and the repatriation tax expense, 2005's fourth quarter net earnings were $19.0 million (78 cents per diluted share), compared with $19.6 million (77 cents per diluted share) in 2004. On that same basis, and including the proceeds from the sale of the healthcare business and a related warehouse, full-year 2005 net earnings were $90.5 million ($3.65 per diluted share), compared with $68.0 million ($2.67 per diluted share) in 2004.
"Banta had a great 2005 and an exceptional fourth quarter," said Chairman and Chief Executive Officer Stephanie A. Streeter. "During the first half of the year we focused on investment and preparation for a strong second half of the year -- and we achieved our expectations. Our employees did a great job during the year with the start up of new and rebuilt equipment, delivering new-technology solutions to our customers, and aggressively implementing culture-shifting productivity processes. I am extremely proud of our employees' accomplishments and eager to see the benefits of their continuing efforts in 2006 and beyond."
The additional fourth quarter tax expense of $4.4 million was incurred because Banta took advantage of the American Jobs Creation Act, which allowed U.S. corporations during 2005 to repatriate accumulated earnings of non-U.S. operations at a significantly reduced U.S. income tax rate. Banta returned a net $122 million of its accumulated foreign earnings to the U.S., thus making the cash more readily available for investment in its domestic operations, consistent with the intent of the legislation.
Including the repatriation tax expense, the company's effective income tax rate for 2005 was 34.0 percent, a decrease from the 35.2 percent recorded in 2004. The effective tax rate without the additional $4.4 million of tax expense related to the earnings repatriation would have been 29.8 percent. The tax rate decrease from the 35.2 percent recorded in 2004 was due largely to the proportion of earnings from locations outside the United States earned by the company's Supply-Chain Management Sector, which has extensive operations in countries whose tax rates are more favorable than the tax rates in the United States.
HIGHLIGHTS
-- Fourth quarter revenue for Banta's Printing Services Sector increased 12 percent to $300 million, compared with the prior year's $269 million. Higher paper prices contributed approximately 30 percent of the increase. Operating earnings climbed 21 percent to $27.0 million, benefiting from improved facility utilization and productivity initiatives, including equipment rebuilds. For the full year, revenue increased 10 percent to $1.1 billion, while operating earnings increased nearly 10 percent, reaching $86.6 million.
-- The book division turned in a solid fourth quarter, with strong activity in business-to-business catalogs and continuing good demand in the educational market. Revenue increased 7 percent over the prior year's fourth quarter and operating earnings rose 13 percent. For the full year, book division revenue increased 7 percent, while operating earnings rose 8 percent. During 2005, the division's educational revenue grew 17 percent, reflecting a strong year for state curriculum adoptions. In addition, major capital investments in the first half of the year, including the acquisition of a new press and the rebuild of another press, increased capacity and improved productivity, helping boost results for both the fourth quarter and full year.
-- The direct marketing division reported a good fourth quarter and an outstanding full year. Revenue for the quarter increased 2 percent, while operating earnings rose 16 percent. For the year, revenue increased 7 percent and operating earnings climbed 42 percent. Throughout 2005, the division benefited from a significantly improved product mix, as the division continued to shift its work mix to more complex and personalized direct mail products.
-- Banta's consumer catalog division reported fourth quarter revenue comparable to the strong fourth quarter in 2004; however, operating earnings declined due to higher operating costs, equipment
scheduling issues and pricing pressures. For the full year, the catalog division recorded exceptionally strong results, with revenue up 13 percent and operating earnings ahead 53 percent,
compared with 2004. Market share gains, improved production quality and productivity improvements throughout the year combined to drive 2005's results.
-- The publications division reported an 11 percent revenue increase in the fourth quarter, with 35 percent of the increase due to higher paper prices. Operating earnings for the quarter declined
4 percent. Revenue for the full year increased 12 percent and operating earnings declined 6 percent. The division continued to gain market share during the year, however additional costs in areas such as employee training and manufacturing process improvement programs have not yet produced the anticipated
benefits.
-- Banta's literature management division, which was established as a separate business entity earlier this year, recorded a breakout fourth quarter with exceptional activity involving several new
projects. The largest project involved the one-time production and fulfillment of information packages related to the launch of an insurer's Medicare Part D prescription drug offering. Due largely
to this program, fourth quarter revenue nearly doubled compared with the same period in 2004, while operating earnings climbed dramatically. For the full year, revenue increased 28 percent and operating earnings, affected by additional expenses related to establishing the division's new infrastructure, rose 9 percent.
-- Banta's Supply-Chain Management Services Sector reported both improved revenue and operating earnings in the fourth quarter, as it continued to experience good demand from both existing and new technology customers. Fourth quarter revenue increased 3 percent to $111 million, while operating earnings grew 11 percent, reaching $14.1 million. Full-year revenue and operating earnings both
increased 4 percent to $429 million and $48.7 million, respectively. Operating margins remained strong throughout the year, supported by a continuing favorable product mix, very successful productivity
improvement efforts and aggressive cost controls. Although revenue from new-business development during the year did not meet expectations, new customer opportunities just starting up in the fourth quarter provide momentum for 2006.
"Banta has strong businesses in stable and growing markets, which will help deliver another solid year in 2006," said Streeter. "We are extremely well positioned. Over the past year, we sold a non-core business, which allowed us to focus on accelerating the growth of our remaining strategic businesses. We made high-impact capital investments, continued to fine tune our market positioning, and significantly advanced our productivity and employee training. Efforts in these areas, and more, will continue in the coming year, helping us further improve upon our 2005 results."